Ledbetter Law Will Increase Suits

This January President Obama put pen to paper and signed his first bill into law—the Lilly Ledbetter Fair Pay Act, which extends the window of time for workers to sue former employers for pay discrimination. The new law also applies to age and disability discrimination, and even allows family members to file a claim. Experts say the law changes the legal landscape for businesses large and small.

So, how worried should small businesses be?

"It's opening the door to a lot more claims," said Beth Milito, senior executive counsel for the Small Business Legal Center at the National Federation of Independent Business (NFIB). "That means more burdens on employers in terms of in-house costs, keeping more records and outside legal fees. It's going to be costly for businesses."

In the early days after the law's passage, human resources departments are taking stock of the changes and hoping for the best.

"I'm still sitting here thinking, 'Ok, let's see what happens'," said Sherry Hirsh, the U.S. chief human resources officer for Lovells, a private company that itself offers legal advice on employee benefits, as well as corporate law and taxation. "We're definitely into different times."

Part of the uncertainty is due to the fact that the Fair Pay Act affects several areas of law related to pay discrimination, including the Age Discrimination in Employment Act and the Americans with Disabilities Act. Even the U.S. Small Business Administration's Office of Advocacy is waiting and wondering.

"We're not exactly sure what types of implications it might have," said Janis Reyes, the assistant chief counsel for the Office of Advocacy. "Right now our office is just monitoring what kind of regulations come out because of this."

One group that is displeased with the law is the Society for Human Resource Management (SHRM), which represents a quarter million HR professionals around the world. While the organization opposes pay discrimination, the new law is more than just a reversal of the Ledbetter court case, said Michael Layman, SHRM's manager of labor and employment.

"The new law would pretty clearly restart the time clock for filing the claim when an employee receives a retirement benefit, a pension benefit, even an (employee stock ownership plan payment)," Layman said. "In doing so, the Ledbetter Act exposes employers to endless liability."

Layman said the new law includes an "unprecedented expansion" of employment law, allowing family members affected by pay discrimination to file claims on behalf of former employees.

Now that the door is open for more lawsuits, experts are united in one recommendation: business owners should keep all the paperwork they can.

"We are now advising members that they really need to be vigorous about documenting employment decisions, and keeping documents," said Beth Milito of the NFIB. "It's a good idea now to start keeping all personnel documents indefinitely."